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Chilvers, Terry, Financial Management (UK)
Not only are accountants in an excellent position to spot fraud, but legal cases often stand or fall by the analysis and opinions of expert witnesses. Terry Chilvers discusses the role of the forensic accountant
Forensic accounting is the use of investigative techniques, integrated with accounting and business skills, to develop information and opinions for evidence in court and for use by expert witnesses. The resulting analysis can be used in law courts as well as for discussion, debate and, ultimately, for resolving disputes. It therefore involves both the fields of litigation support and investigative accounting.
Investigative skills and reporting ability are already integral skills for management accountants, and forensic accounting combines accounting principles, auditing (internal or external), investigative skills and business experience. But it's not about number crunching; it's about solving complex financial riddles -- investigating suspected fraud, determining damages, valuing businesses and resolving other financial disputes using an intuitive approach. Most cases are far more complex than they first appear.
Forensic accountants who wish to be expert witnesses need a thorough knowledge of relevant accounting principles and recent industry developments. This expertise often involves specialist knowledge of a specific industry. They must also be analytical and able to work with incomplete data. They must present complex issues to non-accountants clearly and simply and understand both the legal system and the standards expected of expert witnesses -- most cases are resolved on the strength of expert witness evidence in court.
Most forensic accountants can demonstrate curiosity, persistence, creativity, discretion, confidence, business experience and professionalism. Experts are under huge pressure to "get it right". They must keep a cool head in cases involving large sums of money and, often, ruthless and cunning people. Investigations vary widely; accountants could be asked to do anything from looking into employee fraud in a government department (one assignment involved someone who owned game farms, holiday homes and expensive German cars -- all on a senior government official's salary); to uncovering financial arrangements in a marital dispute.
For example: the president of a company received an anonymous letter implying that senior executives were misappropriating funds for lavish expenses and were constructing fishing and hunting camps for their own use. At the same time, the company learnt that a secret "slush fund" had been set up at the same plant. The money was apparently being used to take clients on promotional trips, including hunting and fishing excursions.
Forensic accountants prepared a report for the company stating that, while some records supported the suspicions, they were far from complete. …